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Education and human capital

Education shows great resilience to shocks—labor demand for highly skilled workers has remained high in all kinds of economic conditions. Public policy for education and human capital includes increasing the economic and social returns on education, fostering greater educational attainment, encouraging social and economic mobility, and providing vocational education, training, and lifelong learning.

Positive contributions to cognitive and
non-cognitive skills justify public support of youth sports

In response to declining budgets, many school
districts in the US have reduced funding for sports. In Europe, parents may
respond to difficult economic times by spending less on sports clubs for
their children. Such cuts are unwise if participating in sports is an
investment good as well as a consumption good and adds to students’ human
capital. The value of sports is hard to measure because people who already
possess the skills needed to succeed in school and beyond might be more
likely to participate in sports. Most studies that account for this
endogeneity find that participation in youth sports improves academic and
labor market performance.

Comprehensive programs that focus on skills can
reduce unemployment and upgrade skills in OECD countries

Reducing youth unemployment and generating more
and better youth employment opportunities are key policy challenges
worldwide. Active labor market programs for disadvantaged youth may be an
effective tool in such cases, but the results have often been disappointing
in Organisation for Economic Co-operation and Development (OECD) countries.
The key to a successful youth intervention program is comprehensiveness,
comprising multiple targeted components, including job-search assistance,
counseling, training, and placement services. Such programs can be
expensive, however, which underscores the need to focus on education policy
and earlier interventions in the education system.

Young people experience worse labor market
outcomes than adults worldwide but the difference varies greatly
internationally

In Germany, young people are no worse off than
adults in the labor market, while in southern and eastern European
countries, they fare three to four times worse. In Anglo-Saxon countries,
both youth and adults fare better than elsewhere, but their unemployment
rates fluctuate more over the business cycle. The arrangements developed in
each country to help young people gain work experience explain the striking
differences in their outcomes. A better understanding of what drives these
differences in labor market performance of young workers is essential for
policies to be effective

Where STEM immigrants were educated strongly
influences their economic success and possibly their impact on
innovation

Canada, the US, and most Western countries are
looking to STEM (science, technology, engineering, and mathematics)
immigrants to boost innovation and economic growth. Canada in particular has
welcomed many STEM immigrants over the past quarter of a century. In the US,
there is an ongoing debate about whether the H–1B visa program is being used
effectively to attract more STEM immigrants. Interestingly, significant
differences exist between the two countries in earnings and likely the
innovation activity of highly educated immigrants, which highlights the
likely role of immigration policy in determining such outcomes.

Workers participating in firm-sponsored training
receive higher wages as a result. But given that firms pay the majority of
costs for training, shouldn’t they also benefit? Empirical evidence shows
that this is in fact the case. Firm-sponsored training leads to higher
productivity levels and increased innovation, both of which benefit the
firm. Training can also be complementary to, and enhance, other types of
firm investment, particularly in physical capital, such as information and
communication technology (ICT), and in organizational capital, such as the
implementation of high-performance workplace practices.

Basic skills in literacy and numeracy are
essential for success in the labor market

Even in OECD countries, where an increasing
proportion of the workforce has a university degree, the value of basic
skills in literacy and numeracy remains high. Indeed, in some countries the
return for such skills, in the form of higher wages, is sufficiently large
to suggest that they are in high demand and that there is a relative
scarcity. Policymakers need robust evidence in order to devise interventions
that genuinely improve basic skills, not just of new school leavers entering
the market, but also of the existing workforce. This would lead to
significant improvements in the population that achieves a minimum level of
literacy and numeracy.

Vouchers can create a market for training but
may lengthen participants’ unemployment duration

The objective of providing vocational training
for the unemployed is to increase their chances of re-employment and human
capital accumulation. In comparison to mandatory course assignment by case
workers, the awarding of vouchers increases recipients’ freedom to choose
between different courses and makes non-redemption a possibility. In
addition, vouchers may introduce market mechanisms between training
providers. However, empirical evidence suggests that voucher allocation
mechanisms prolong the unemployment duration of training participants. But,
after an initial period of deterioration, better long-term employment
opportunities are possible.

There is a positive association between study
abroad and graduates’ job prospects

In recent decades, the number of university
students worldwide who have received some part of their education abroad has
been rising rapidly. Despite the popularity of international student
exchange programs, however, debate continues over what students gain from
this experience. A major advantage claimed for study abroad programs is that
they can enhance employability by providing graduates with the skills and
experience employers look for. These programs also increase the probability
that graduates will work abroad, and so may especially benefit students
willing to pursue an international career. However, most of the evidence is
qualitative and based on small samples.

Dropping out of university can be more
advantageous than not having enrolled in university at all

With university education continuing to expand
worldwide, university dropouts will make up a large group in future labor
markets. Dropping out is routinely viewed as a negative indicator. However,
data on university dropouts does not generally provide information on their
labor market outcomes, so empirical evidence is sparse. The studies that
have examined the issue show that dropping out can be more of an advantage
than not having enrolled in university at all. Many dropouts are more likely
than upper secondary school graduates with no university education to
progress in their careers. And many graduate later in their life.

Universities deliver more competent graduates and higher
quality research if they are more autonomous and well-funded

University autonomy and funding is an important aspect in
university-level education due to its impact on graduates’ competencies, and on the quality
and quantity of research produced. Political factors influence the amount of autonomy allotted
to public universities in specific countries. There is sufficient evidence to suggest that an
increase in autonomy for universities would provide better educational outcomes and have a
direct impact on labor market productivity. However, the debate on autonomy has been
overshadowed by discussions on tuition fees and student aid in political circles.